Fortitude Valley – or simply ‘The Valley’ as it
affectionately called by the locals, sits on the North East border of Brisbane’s
CBD. Together with neighbouring Bowen Hills and Newstead, the Fortitude Valley
area is referred to by the real estate industry as the “Urban Renewal”
precinct. Fortitude Valley has a colourful reputation as music venue
and nightclub hot spot akin to Sydney’s Kings Cross or Melbourne’s St Kilda. However
The Valley is more than just a place to party. From the early 1990s the
Brisbane City Council’s policy of urban renewal has helped transform Fortitude
Valley into a booming commercial hub as well as a coveted residential address.[1]The Urban Renewal area’s commercial real estate market took
off in the 2000s on a tide of investment stemming from Queensland’s mining
boom. According to JLL, Brisbane’s non CBD office markets have nearly doubled in
size over the past 10 years (from 691,000 sqm in 2004 to 1.274m sqm in 2014) with
most of the action taking place in The Valley.[2]The migration of high profile tenants into Fortitude Valley
was driven initially by a dearth of space in the CBD. Development in The Valley
has trended towards an expansive ‘campus style’ model – similar to that found
in Melbourne’s Docklands or Sydney’s North Ryde. This appealed greatly to
tenants looking for spacious layouts that were difficult to find in Brisbane’s
centre.[3]At the same time Fortitude Valley’s emergence as a ‘hipster’
destination with a buzzing night club, dining and retail scene strengthened the
suburb’s appeal with prospective tenants. The location came to be viewed as a
drawcard for younger, skilled, upwardly mobile workers. The Valley’s proximity
to the CBD and great transport infrastructure no doubt also contributed to its
rising profile[4]. Whilst the end of the mining boom has impacted demand for
office space in Brisbane, the Fortitude Valley commercial real estate market
has been very active over the past 12 months. M3 Property Strategists have
noticed a definite recentralization trend. Improved affordability in the CBD
has lured a number of firms from the Urban Renewal precinct and other fringe
markets. This has been counter balanced by outer suburban firms moving in to
the district. One such example is telecommunications contractors Vita Group who
have recently relocated to Bowen Hills from Albion.[5]With a high proportion of A-Grade stock, the area has
benefitted from a ‘flight to quality’. [6]Despite
the challenging environment, headline vacancies dropped over the first half of
2015 from 14.3% to 12.4% - significantly lower than the Brisbane CBD at 15% [7].
According to Colliers, significant tenant demand in the
Urban Renewal precinct is coming from smaller occupiers (sub 500 sqm) as a
result of corporate downsizing. There has however, been some larger
transactions bucking the trend – specifically leasing deals with Lend Lease,
Robert Bird, Konica Minolta and the QLD Government.[8]M3 report that despite downward pressure in the Brisbane
market as a whole rents in the Urban Renewal precinct have stayed firm.
Nevertheless incentives have crept up reflecting the tenants’ increased
bargaining power. As at July 2015 Prime Gross Face rents sat between $525 and
$600m per square meter per annum with incentives averaging 35%.[9]

Businesses considering renting an office in Fortitude Valley
should act quickly in order to snare a favourable deal. New supply is limited
whilst the residential conversion trend continues to remove stock from the
market. Vacancies will only tighten as confidence returns to the Queensland
economy and the balance of power will start to swing back towards the land
lord.